There’s been a lot of buzz around the most recent events surrounding QuadrigaCX. For those of you who aren’t aware – QuadiragCX is a Canadian Bitcoin Exchange that have recently lost access to their customers funds. The entire incident is all rather suspicious, but we will not be diving into that drama over here. You can simply google “Quadriga Scam” to find out more. In this post, however, I want to discuss the risks that people tend to ignore when dealing with exchanges like QuadrigaCX.

Specifically I want to talk about Counterparty Risk.

In usual Mango-style, we’re going to break this concept down piece by piece. To understand what is Counterparty Risk, we first need to discuss precisely what is “Counterparty".

What is a 'Counterparty' ?

A counterparty is the person or organisation on the other side of a financial transaction. If you make a financial deal with someone, then the person on the other side of the deal is the counterparty. Here are a few examples of counterparties:

If you loan money to a friend, then your friend is the counterparty (Credit Risk)

If you put money in the bank, then the bank is the counterparty

If you deposit money into a broker (or exchange), then the broker is the counterparty

Whenever you engage in a financial transaction with a counterparty, you are exposing yourself to Counterparty Risk.

What is Counterparty Risk?

Alright, so what is Counterparty Risk? Counterparty risk is the risk that you are bearing incase the person on the other side of the transaction cannot fulfill their end of the deal

Put briefly: Counterparty Risk is the risk that the counterparty defaults or goes bankrupt.

In the previous section we listed a few examples of counterparties. In each one of those cases, you were also bearing Counterparty Risk. Let’s use those same examples when pertaining to Counterparty RIsk:

You lend money to a friend and he cannot pay you back

You put money in a bank, and the bank goes insolvent (due to bank-run, financial collapse etc)​

You deposit money into an exchange, and the exchange gets hacked or loses all your funds.

By now, you’re seeing that it’s all pretty straightforward. Whenever you engage in a transaction with another party (counterparty), you are bearing the risk that the other party may not be able to deliver when the time comes to fulfill their end of the transaction

Difference Between Counterparty Risk & Credit Risk

I’ve received this question a few times now: What is the difference between counterparty risk and credit risk?

Counterparty risk is actually a subset of Credit RIsk.

So essentially – Counterparty risk isa form of Credit Risk. Credit Risks typically refers to the risk you assume when the counterparty cannot payback a loan (for example when you buy bonds).

​​​​Real Examples of Counterparty Risk

So, now we understand what Counterparty Risk actually is. But let’s go over a few examples how bad Counterparty Risk can get. A lot of people have lost a lot of money because they didn’t take counterparty risk seriously enough. Here are a few recent examples of counterparty risks that took a bad turn:

The Flash Crash of EUR/CHF: Several brokers actually went broke overnight on this one. In 2011, the Swiss National Bank (SNB) put a price floor on the EUR/CHF pairing. Essentially, they pegged the EUR/CHF at atleast 1.2 in an effort to facilitate cheap exports. This caused a lot of traders to take advantage of the price floor.

However, after a series of events – the SNB suddenly removes the price peg and the exchange rate dropped by 20% within the first minute. This caused a massive flash-crash. Traders not only lost their entire balance, but their accounts actually went into the negative! They owed more than they actually had.

The Mount Gox Hack: Mt. Gox was a major cryptocurrency exchange back in the day. In 2014, it suddenly suspended all trading without any clear explanation other than “maintenance”. Apparently, a security breach/hack caused the exchange to go insolvent. They soon announced bankruptcy and closed trading altogether. Traders who had their funds in there lost everything.

Death Of QudrigaCx CEO: This is the most recent event/example of counterparty risk at its truest form. QuadrigaCX is a Canadian Cryptocurrency Exchange. A few weeks ago, the CEO of the exchange dies while on vacation in India (apparently!). It was then uncovered that he was the only one who could access all the customer funds in the exchange. Furthermore, his laptop could not be found after his death – making it impossible to access the cryptocurrency which was stored in a secure cold wallet. Almost $150 million dollars of customer funds have been lost. Some people lost their entire life savings.

How To Mitigate Counterparty Risk

While Counterparty Risk can be a scary thought, there are several ways to mitigate counterparty risk. Taking the appropriate steps to mitigate these steps will keep your finances in tact even if a Black Swan event takes place.

Divide your funds among Banks that insure your money:Most banks provide deposit insurance on a your money up to a certain amount. You can reduce your counterparty risk exposure by placing your money in several different banks. This will ensure the most coverage.

Don’t send your entire trading account to an exchange: If you’re a trader, it may be in your best interest to trade with only a portion of your funds and leverage the rest. For example you can send 20% of your account to the exchange, and keep the 80% in your bank. With a 5x leverage, you can trade the same amount while still protecting yourself in case the exchange goes down. If you’re looking for an good cryptocurrency exchange that allows for leverage trading, we recommend Deribit

Credit Checks & Deposit Requests:If you’re renting out your apartment, or loaning money – it’s best to do credit checks on the counterparty. If you’re a landlord you can ask for security deposits. Banks and credit card companies do a credit check on your financial history for this very reason – to reduce their counterparty risk. They will assess their counterparty risk when dealing with you as a counterparty, and accordingly offer you an interest rate. Landlords do the same and ask you for a security deposit. The interest rate and deposit rate will cover any losses that they may incur in case you don’t fulfill your end of the deal (i.e payback credit card, and not damage property)

Conclusion: What Is Counterparty Risk?

When we engage in any sort of trade/ transaction with a counterparty, it’s more often a means to an end. In the process of achieving that end we often forget to account for counterparty risk.

The rules & regulations that govern many counterparties ( banks, exchanges, businesses) usually evoke the feeling of safety and reliability amongst many of us. And while the crash of banks, exchanges and business is improbable, it is still possible.

Given that our world is highly reliant on counterparties for the purpose of trades and transactions, we can’t eliminate counterparty risk entirely. However, we can mitigate counterparty risk by doing the following: (limited to the scope of examples in the post)

For those who are “banked” – Do not put all of your eggs in one basket.Divide your funds among Banks that insure your money

For those of you who trade – Crypto, Forex etc – Don’t send your entire trading account to an exchange. Change the narrative around margin trading and use it to mitigate counterparty risk.

loaners/landlords – Do a Credit Check, or ask for a Deposit Request

In short, always think of a means to protect your wealth in the case of a black swan event. Black Swan events are notorious for taking you for everything you’ve got and more.

Disclaimer: The ideas presented in this article should not be taken for investment advice, and are simply the views and opinions of the authors.

This is the fourth weekly collaboration between Eric Crown & Mango Research. Eric is, by far, one of the few technical traders in the space that really knows what he’s doing. He has over 10 years of experience trading traditional markets and market-making for equities. What we like about Eric the most is that he doesn’t simply trade technicals – he trades the crowd psychology & behaviour derived from the technicals. We’re excited about this collaboration and will hope you enjoy & learn as much as I have from Eric.

Quick Overview

Bitcoin appears to be printing a bear-flag as it continues inching toward the $3250 mark that we forecasted a few weeks ago. More importantly, for the first time in the history of Bitcoin, the monthly candle opened below the 55EMA. The response from the bulls have been weak thus far.

The descending volume further indicates that buyers aren’t willing to step in just yet. Since price action appears to be in a slow, declining consolidation, all bearish indicators discussed in our last couple of reports are still very much in play.

The report also discusses the 4 Day Death Cross and the the Volatility Index as pointed out by the Eric Crown.

Note: Our bias/opinion is always on the side of the trend – and the trend is still Bearish!However, technical analysis on current price action proposes a case for both – Bulls & Bears

10 SMA - A Daily Harasser

BTC started the weekend strong with a rally up to the $3485 area. The move was cut short, however, as it was met with stern resistance from the daily 10 Simple Moving Average. As expected, the price quickly retreated back to the $3380 region. This has been the story for the past few weekends now: Bitcoin rallies & hopes run high, Bitcoin is met with a key daily EMA, Bitcoin retreats & hopes are crushed. This is a classic sign of bearish consolidation & distribution.

As Eric Krown has stated:

“Bitcoin is being walked down gradually toward the $3250 mark”

BTC/USD – Rejection of daily 10 MA

The rejection of the daily 10 Simple Moving Average was key. The 10 SMA has been holding down price action for over two weeks now. This indicates that the sellers are in firm control.

Break Of The Monthly 55EMA – History was made!

In our last report we discussed the grim possibility of Bitcoin closing a monthly candle under the 55 EMA. Well, that possibility has now turned into a reality. This does not bode well for Bitcoin bulls. The monthly 55EMA has proved as strong support for the preceding 3 months. We saw price get rejected every single time until its break last week.

To reiterate – February started the month with Bitcoin opening under the 55 EMA – with January closing under the 55 EMA. This clear open & close under the monthly 55 EMA is a first in Bitcoin’s history. Bears have pushed price into new territory. And buyers are seeming more hesitant than ever.

It must be noted, however, that Bitcoin is relatively young. It hasn’t had enough market cycles to test the 55 EMA before. This lack of price history should be taken into consideration before placing weight on this forecast.

BTC/USD February Candle Opens Below Monthly 55EMA

A retest of the 55 EMA in the month of February should not be discounted either. The 55 EMA currently sits at the $3674. A retest and rejection of this region will further strengthen our bearish bias.

Major moves are what gives us a broader perspective on overall market sentiment and expectations. However, it's the minor/intermediate moves that will help us make informed technical forecasts. And so far we have 3 moves still in play suggesting incoming support.

Inching toward the $3250 Mark

In the last few reports we emphasized that multiple signs point to the $3250 mark. As of now, nothing has changed. There has been far too much confluence to suggest otherwise, namely:

The Symmetrical Triangle

Double-Top Murder Formation

Weekly 200 SMA

We’ve discussed the symmetrical triangle and the double-top formation in greater length in the previous reports. As long as we respect the $3750 region – both of those patterns are still in play. And both of them have a measured move to the $3250 mark.

For now, however, our most immediate (or closer) concern is the 200 MA which is drawing the perimeter for the $3250 target.

Weekly 200 MA

The 200 MA that proved as major support back in December at $3100-$3200 region as well – confluencing with both measured moves. The first bounce off the 200MA back marked BTC’s local bottom on the weekly chart, confirming it as key support.

This 200 Weekly is a major EMA that has a lot of eyes on it. And the more eyes you have on a support/resistance line, the stronger it is likely to be. Bitcoin has been ranging between this 200 SMA and the 200 EMA. A break of either one of these will likely lead to a bigger move.

BTC/USD Weekly 200 MA Support at $3298

We’ve tested the 200 EMA a couple of times already – and it’s proven itself as strong resistance. As we inch toward it gradually, we are leaning stronger and stronger toward this breaking.

Note: The 200MA has creeped up since the last test in December where it was sitting at $3100 level. As things stand, the 200MA is currently sitting at $3298.5 (Bitstamp).

However, it is extremely important that we wait for a confirmation before making any major trade decision. As Krown has stated himself:

“There’s more pressure to the downside than not – however, I’m going to wait for a daily break of the $3250 or the weekly close under the 200 Simple Moving Average”

Volatility Incoming?

BTC has been consolidating between the weekly 200 EMA and 200 MA for over 2 months now. This consolidation has brought btc to a state of decreasing volatility.

Krown observed that low volatility was frequently followed with a sudden price move leading to high volatility. While this may not be a definite play, it is a highly probable one based on historical data.

Question is, are we expecting a price move to the upside, or the downside? Well, given recent price action, there’s a stronger bear case than a bull case.

4 Day Death-Cross

The last 4-day candle close marked a fresh 55-200 EMA death-cross. A death cross suggests a potential major sell-off incoming. This is the second 4-day death-cross in BTCs chart history. The death cross may be a reliable indicator in forecasting a major sell-off in traditional and crypto markets.

BTC/USD 4 Day Death-Cross

However, it may be prudent to further strengthen a bearish analysis with another suggestive bearish indicator. Death-crosses make for good BTC price forecasts on lower time-frames. However, this may not hold true for higher time-frames given BTC lack of price history.

Ethereum: Resolution On The Measured Move

Last week we left off with Ethereum getting rejected at the Head & Shoulder (top) neckline. only to form a bearish descending triangle. Ethereum soon after made an announcement of postponing their much anticipated Constantinople hard-fork. Although Ethereum was already forming a bearish pattern, the announcement only helped fuel bearish sentiment.

This resulted in the break of the descending triangle on January 27th. The break-down of the descending triangle had a forecasted measured move of $99 (approx.

Break down of Ethereum's descending triangle with a forecasted measured move at $99

As Ethereum’s price action unfolded after the release of our last report, the forecasted measured move was indeed hit – albeit with a slight front-run. Ethereum wicked its way down to $100.9 and closed at $102.92.

Ethereum's Descending Triangle Reaction

For now, Ethereum is acting much like Bitcoin: bearish consolidation. Price action looks to be limping along and we are expecting a resolution on this consolidation very soon as well.

Weekly Bitcoin Price Prediction: Summary

Overall – our sentiment leans strongly to the down side. As mentioned, Bitcoin is currently in a bearish consolidation and Ethereum is following suite. All signs point to at least $3250, but the question remains as to whether or not we make a nose-dive right past it.

Price seems to be inching closer and closer toward the 200 SMA on the weekly (currently at $3300) as volatility pressure builds up. Multiple indicators point toward an explosive move. Will the explosive move be a break? Or a bounce? A break points toward lows of $2400 - $2600. A bounce may take us all the way back up to the $3800 region. However, as indicative in this report – we lean to the downside.

We’ll have a more concrete opinion as price action develops. So stay tuned for the next report!

The double-spending problem has been a conundrum in the digital-cash realm for decades. In fact, it was the double-spending problem that held back the advancement of peer to peer digital cash. It wasn’t until the arrival of the Bitcoin Network that a p2p decentralized digital currency really began to be viable.

Many of us “know” that Bitcoin solves the double spending problem, but we still struggle to explain how Bitcoin solves this problem. In fact, it was only yesterday that I received this email from a regular Mango Reader:

Wont a miner be able to “double spend” his bitcoin by simply broadcasting a transaction on the network and then quickly mine a block that sends the same bitcoin to another merchant?

Thank you,

Juan”

Good question, Juan. This is actually a common misunderstanding. But before I answer you, let’s quickly explain the double spending problem for the readers who may be unfamiliar with it.

Double Spending Problem Explained

Anything digital can be copied – anything. And more importantly: it can be copied exactly. This is a huge problem in the digital space when pertaining to digital rights management and… digital cash. Pirated movies, pirated music, pirated software etc. have all been birthed from our ability to copy anything that is in digital format. To most of you, this has been a blessing in disguise.

But imagine if digital cash could be pirated as well? What would be the implications?Hyperinflation, for one.

This is one of the primary reasons why we still rely on central authorities for our financing needs. The central authorities (like banks) maintain a ledger where they keep tab of everyone’s expenses. They ensure that double-spending doesn’t occur (..or try to!)

However, centralized solutions pose a single-point-of-failure problem. They can easily be hacked or compromised externally (bribed). But for decades, it was the only solution we had – until Bitcoin came into the picture.

Satoshi Nakamoto proposed an elegant solution in his whitepaper where he explained how the Bitcoin Network would solve the double-spending problem.

Misunderstanding Double Spending Problem In Bitcoin?

Similar to centralized solutions, Bitcoin also uses a ledger to keep track of transactions. However, this ledger is stored across the globe at multiple locations (called nodes).

This global ledger is called the “Blockchain”.

Why? Well, because it’s simply a chain of “blocks”. Each of these blocks contain transactions that have taken place in the network.

New transactions that are broadcasted to the network are picked up and put into these “blocks” by miners. Once the block is created, a miner will initiate his mining process where he attempts to solve the Cryptographic Puzzle.

The miner who solves the puzzle first wins the “right” to submit his block to the blockchain (the global ledger). They then move on to the block of new transactions.

This is where Juan’s question comes into play. He’s asking about this hypothetical scenario that explains the (misunderstood) double spending problem.

Miner Joe has only 10 bitcoin in his wallet

Miner Joe sends those 10 bitcoin to Merchant Alice

The network & miners pick up the transaction.

All the miners put together a block with this transaction: “Joe sends 10 BTC to Alice”

Is that a double spend?No, it is not a double-spend at all. Sure – it is an attempted double spend. But Miner Joe was not able to pull it off.

Why? Because Joe’s block with his transaction : “Joe sends 10 BTC to Bob” got added to the chain. This means that the blocks containing the transaction: “Joe sends 10 BTC to Alice” did not get added – and was never considered at all.

Double Spending Problem: Forks & Longest Chain

Remember, Joe won the Cryptographic Puzzle race, so his block gets added to the chain, while everyone else’s block is rejected.

Ah, but what if Joe was not the only one who solved the puzzle? Often, more than one miner may solve the cryptographic puzzle. This means that multiple blocks may be added to the chain at the same point – resulting in a blockchain Fork.

So what if another miner – Miner Collin – also solved the cryptographic puzzle. We would now have two blocks with the following transactions:

Joe’s Block: Joe sends 10 BTC to Bob

Collin’s Block: Joe sends 10 BTC to Alice

Would this be a successful double-spend? It may look like it – but nope, this is not a successful double-spending attack.

The blockchain has forked into two different chains, one with Joe’s block as the newest block; and the other with Collin’s block as the newest block. It is here that the Bitcoin Network will have to pick one of the chains as its main chain. How does it pick it? It will essentially use the Longest Chain Rule.

I explain the Longest Chain Rule using a simple analogy in the post above. But I’ll quickly go over it here.

The Longest Chain Rule Summarized

Essentially, the network will pick the chain that is the “longest” as it’s main chain. This means that the network will have to wait for a few more blocks to be added to the chain before a decision can be made.

If the chain with Joe’s block outpaces the chain with Collin’s block, then Joes block will be valid since it will be in the winning chain. Collin’s block, however, will be considered “orphaned” and invalid.

Even if the opposite happens, it won’t matter – because only one of the two transactions will be considered valid. So the double-spending problem doesn't really come into play here.

Double Spending Problem: Confirmations are Key!

But what about Alice? Is she at risk here? In fact, Alice is actually at risk of being victim to a pseudo double-spending problem. I say “pseudo” because it is not so much a double-spending problem within the network, but “outside” of it.

Two transactions were broadcasted to the network:

Joe’s Block: Joe sends 10 BTC to Bob

Collin’s Block: Joe sends 10 BTC to Alice

Joe’s block was added to the blockchain and Collin’s block was orphaned. But remember, transactions are broadcasted to the network – regardless of whether they get added to the chain or not. So Alice will have received a network message saying “Joe sends 10 BTC to Alice”

As a merchant, Alice may get tricked by this and give Joe some merchandise. However, this is not a fault of a network – but more so a human error. The bitcoin was not officially “double spent” inside the network.

This is precisely why it is always recommended to wait for “Confirmations” on your transactions. Each “confirmation” represents an additional block being added to the block which contains your transaction. Every time a block gets added (a confirmation), it means that there is an increased probability of your transaction being in the Longest Chain. At around 5-6 confirmations, you can be pretty sure that your transaction is safe – you won’t be at risk of a double-spending attack.

So...Is A Double-Spend Even Possible in Bitcoin?

Yes, a double-spend is technically possible in the Bitcoin Network. However, it's going to be extremely difficult and expensive to pull it off.

If Miner Joe wanted to actually commit a double-spend, he'd have to start mining his own private chain secretly. In the original chain he'd send the 10 bitcoin to Alice. But in his private chain he'd send the 10 Bitcoin to Bob.

He'd then wait for Alice to receive her six or more confirmations. In the mean time, he would have to ensure that he mines fast enough so that his private chain outpaces the original chain. If his private chain becomes the longest chain, the rest of the network will switch over to mining on his chain instead – because of the Longest Chain Rule. This way he can pull off a successful double-spending attack.

However, this is a lot easier said than done. In my post on Proof Of Work - Determining Majority Power, I discuss how CPU Power is a crucial part of the consensus process. Miner Joe would need to expend a lot of energy and have a lot of computing power to actually outpace the Bitcoin Network.

It's possible – but far too expensive! A double-spending attack would need a lot of CPU PowerHe would essentially need at least 51% of entire networks hashpower to outpace the network eventually. Remember, he has to solve a cryptographic puzzle for each an every block. And he only has a chance to win each block. His chance to win, however, is directly proportional to his hashpower. This is why the communitytries to ensure that no particular mining pool has too much control of the Bitcoin Network. Anything over 50% makes the network vulnerable to an attack!

There seems to be a scam going around that is picking up popularity. It’s called “Bitcoin Doubler”. I would have liked to believe that no one would be naive enough to fall for this. But then I realized that there are many new entrants in this space. Unfortunately, many of them entered at the peak of the 2018 bubble.

As a result, people seem to be desperate to recuperate their losses at any cost. Ignorance + Desperation typically leads to careless actions.

Bitcoin Doubler: What in the world?

In the past week, I’ve received a few scary & surprising questions. Here are a couple of them:

Hi Shawn,

I was wondering what you think of Bitcoin Doubler sites?

They claim to be able to double my bitcoin instantly. Is this possible?

Thank you!”

Quick Answer: No, it is not possible. All of these websites are scams. They are designed to feed off the desperate by making them gamble with their Bitcoin.

And here is another one:

“Hey Shawn,

I received an email from a Bitcoin Doubler Expert who says he can double my bitcoin in 1 hour. He says he is an expert in bitcoin and can double my bitcoin if I pay him.

Would like your thoughts,

Cheers!”

Now, hopefully, most of you are as surprised at these questions as I was. But if you’re not – I’ve clearly not been doing my job well enough. Either way, I’m going to fix that in this post. But before I go any further, let me state in bold:

Do not , I repeat, Do not trust any website or person claiming to be able to double your bitcoin. It is most definitely a scam!

If you have any doubts or questions regarding this – don’t hesitate to email me. It’d be a real shame for any of you to get scammed – especially if you’re a Mango Reader. I mean… Bitcoin Doubler? Jesus Christ man…

What is Bitcoin Doubler? Does it really work?

Bitcoin Doubler is simply a scam. That’s all there is to it. Any website or person claiming to be a “Bitcoin Doubler” is trying to steal from you. The website (or person) will coax you into sending them funds. Once you do, you will not hear from them again.

How does the Bitcoin Doubler Scam work?

There are several variations of this scam. Some of them claim to double your bitcoin in one hour for a fee . Others claim to allow you to “bet” your bitcoin for a chance to double it. Then there are some that are simply MLM-like scams (which can be even more dangerous). Let’s quickly go through some of these “bitcoin doubler” scam variations

The Bitcoin Doubler Expert Scam

In this variation of the scam, someone will likely email you and claim to be some sort of “Bitcoin Doubler Expert”. The person will use garbage terms like “black hat hacking” and will attempt to convince you that he can hack the network to double your bitcoin instantly. He will make lofty claims about having a “bitcoin doubler script” that he coded himself. All you will have to do is pay the person a fee for his efforts to develop the script. He may even try to sell you his magical bitcoin doubler script. Sigh.

Do not fall for this. No one can hack the Bitcoin Network to double your bitcoin for you. Bitcoin isn’t something that can be “hacked”. I won’t go into why in this post. It is tamper proof, immutable and decentralized. The weakest link to the Bitcoin network security is the actual user himself – i.e: The only way for you to lose your Bitcoin is if you give it away. So anyone claiming to “double your bitcoin” by hacking the network, is essentially trying to say that he is going to hack someone else's Bitcoin and give it to you. That is not possible.

The "Double Your Bitcoin Instantly" Betting Scam

This variation of the Bitcoin Doubler Scam feeds not only on desperate people – but on reckless gamblers as well. These websites will claim that you can double your Bitcoin if you place a “bet” with your Bitcoin. Most of these websites claim that your chance of “doubling” your bitcoin is more than 50%. The Bitcoin Doubler website will ask you to place your bet by sending your Bitcoin to their Bitcoin Wallet address. Once you send them your Bitcoin, it will be gone for good.

These guys are bit more “clever” with their scam. They have a good answer if you ever try to contact them. Since it is technically a “bet”, they can simply claim you lost the bet – and the victim is likely to believe them. You will also notice that a new Bitcoin Wallet address is generated each time you visit the website – this is a huge red flag! It allows them to cover up their previous victims.

The Bitcoin Doubler MLM Scam

This particular variation of the Bitcoin Doubler scam can be particularly insidious. The victim may actually be coerced into falling for this scam by his own friends or family – who are most likely victims of the scam too. It’s pretty much the same model as a Multi-Level-Marketing model (aka pyramid scheme). The scammers convince people to go out to their friends & family and trick them into sending them Bitcoin as well.

Conclusion: Bitcoin Doubler Sites are Scams! Beware.

While it’d be really nice to double your bitcoin instantly, life just doesn’t work out to be that easy. Be wary of anyone proposing to double/ multiply your bitcoin. Bitcoins are of limited supply, and the bitcoin blockchain is one of the highest standards of security achieved thus far. One can't just simply create bitcoin through sheer will of doubling their stack.

Disclaimer: The ideas presented in this article should not be taken for investment advice, and are simply the views and opinions of the authors.

This is the third weekly collaboration between Eric Crown & Mango Research. Eric is, by far, one of the few technical traders in the space that really knows what he’s doing. He has over 10 years of experience trading traditional markets and market-making for equities. What we like about Eric the most is that he doesn’t simply trade technicals – he trades the crowd psychology & behaviour derived from the technicals. We’re excited about this collaboration and will hope you enjoy & learn as much as I have from Eric.

Quick Overview

A lethargic week of price action culminated with a rollercoaster weekend with an explosive break to the downside. Forecasts from the previous reports are playing out well. Overall trend still remains bearish. Multiple signs point to a revisit of the weekly 200MA. In fact, price appears to be dropping even as we conclude this report.

While we do believe that Bitcoin will eventually make new lows, we believe that we are likely to encounter strong support at the $3.2k region. Although, the break of the monthly 55EMA leads us to believe that BTC may break the $3.2K level on its current drive down.

Bloody Monday! And Rejected EMAs!

Another roller coaster weekend. But this time, we followed up with a Bloody Monday.

The entirety of the week comprised of “wicks” shooting to either side of the narrow trading range. This is a clear indication of “liquidity hunts”. Institutional money looking to distribute (and/or accumulate) in target price-areas where retail investors are likely to place their orders. Once they tap into that liquidity, the price promptly returns to the range. We witnessed that all week and cautioned against trading the lower time frames.

If price action in the past week frustrated traders, the weekend was just as bad . Bitcoin bursted out of its trading range early in the day and shot up to $3660 to test the 21 EMA. Once again, sellers promptly stepped in and the move was sold into. Krown managed to catch the move live on video this Saturday. He was quick to place a short himself – a rather exciting video after week of lethargic price action!

BTC/USD – Rejection of daily 21 EMA at $3650

The following events contributed to Krown’s conviction in the short.

Rejection of the daily 21 EMA

Rejection of the daily 10 SMA

Rejection of the weekly 10 SMA.

Furthermore, Bitcoin is still playing out the the larger symmetrical triangle that we’ve been discussing. Taking all of this into consideration, it’s no surprise that Monday started off with blood.

All signs still point to (at least) $3250

We’ve been saying it for almost a month now. All signs point to the $3250 area. Nothing has changed. There has been far too much confluence to suggest otherwise, namely:

The Symmetrical Triangle

Double-Top Murder Formation

Weekly 200 SMA

The Symmetrical Triangle

As depicted in the previous reports, BTC was forming a Symmetrical Triangle for weeks. It finally broke down at the $3850 region. While price action remains below that level, the measured move for this formation points to the $3250 region.

The Double Top

Then we had the Double-Top “M for Murder” formation on the 3-Day. The break of the neckline of this formation occurred at the $3700 region. It’s measured move pointed to the $3250 region as well. Considering this is a double-top formation on a higher time frame, we had a high degree of confidence in it playing out (and so far it is).

The 200 MA

Finally, we have the 200 MA that is sitting on the $3250 region as well – confluencing with both measured moves. The 200 MA is the mammoth of all MAs – especially on the weekly time frame. Almost all eyes are on this moving average. And the more eyes you have on a support/resistance line, the stronger it is likely to be. Bitcoin has been ranging between this 200 SMA and the 200 EMA. A break of either one of these will likely lead to a bigger move.

BTC/USD Weekly 200 MA Support at $3298

We’ve tested the 200 EMA a couple of times already – and it’s proven itself as strong resistance. And now, it looks like Bitcoin wants to test the support at 200 SMA another time. Will it hold?

Note: The 200MA has creeped up since the last test in December where it was sitting at the $3100 level. As things stand, the 200MA is currently sitting at $3298 (Bitstamp).

Lows in? Nope – Not yet.

Price may very well bounce of the 200 SMA. However, we strongly believe that Bitcoin is eventually going to break through this level and make new lows. We typically like to see at least a few flags turn green to indicate a possible low. Some of these flags are:

High Volume Buying

Volatility Index

NVT Signal

None of these signals are flashing on – which makes us lean to newer lows. Our eyes are on some key levels of support:

$2450 zone

$1900 zone

$1150 zone

Of course, these need to happen one at a time. When will this happen? Well, time-analysis can be tricky. These things can take time to play out. That being said there's a counterpoint that may indicate a more immediate break of the level: The Monthly 55 EMA.

55 EMA Monthly: An S&R Flip?

As the month draws to a close, we are approaching a crucial decision point on the charts. Over the past month we’ve been keeping a close eye on the monthly 55 EMA. As mentioned in the previous reports – higher time frames tend to hold the strongest significance. Moving averages, patterns and horizontals have a higher degree of playing out on higher time frames.

Bitcoin has never closed under the Monthly 55 EMA in its history. That being said – we must emphasize that Bitcoin is still relatively new. It hasn’t had enough time (market cycles) to test its monthly 55 EMA with conviction. This market cycle, however, has given Bitcoin ample of time and opportunity – and it’s not looking good.

BTC/USD Monthly 55 EMA Support at $3674

55 EMA on the monthly has seemed to have turned from support to resistance. This is an extremely bearish sign. The monthly 55 EMA has successfully held as support on all prior monthly closes. However, as we inch towards the end of this month of January,the monthly 55 EMA seems to have given way.

Support has turned into resistance (S&R Flip) as January struggles to break past the 55 EMA sitting at $3670 level. Thisconfluenced perfectly with the rejection of Bitcoin’s breakout this weekend

We still have three days left for Monthly candle close. But as things stand, it likely that we are going to close underneath the 55 EMA. An official close below the 55 EMA will make the larger picture look grim.

However, anything is possible in Bitcoin land. A dramatic move to the upside should not be discounted. A lot can happen in three days.

Ethereum: Leading The Market Up ...And Back Down!

Ethereum’s news driven rally back in December 2018 took the entire market up with it. However, we cautioned that it is very likely that it takes the entire market down with it as well. It seems that the market is playing out just as we predicted. This was highly anticipated since it is class event-driven market-behaviour:

Event is announced

Market rallies leading up to the event

Market dumps closer to the event

Interestingly enough the event that was supposed to take place – never even happened. Constantinople was delayed and pushed back to the last week of February. Could we see the entire sequence of events repeat? Afterall, the initial rally seemed to have been a carbon copy of the BCH fork rally. Let’s see how things pan out..

That being said, Ethereum was forming the perfect Head & Shoulders pattern. Erik Crown stated that it had all the right characteristics for the pattern:

Correct shape

Correct Volume characteristics

Correct Price Action characteristics.

Well defined neckline.

Ethereum's Head & Shoulders neckline rejection!

However, the formation began to show some hesitation & doubt when the right shoulder got extended far too much. It was followed up with a rejection of the neckline to the upside.

But the distributive price action morphed the formation into a smaller descending triangle – which Eric discussed extensively on his daily streams. The measured move pointed to approx. $99. This seems to be playing out as we type this (Ethereum is currently sitting at $103.15)

Break down of Ethereum's descending triangle with a forecasted measured move at $99

Weekly Bitcoin Price Prediction: Summary

Overall trend remains bearish. Multiple signs point to a revisit of the weekly 200MA. In fact, price appears to be dropping even as we conclude this report. While we do believe that Bitcoin will eventually make new lows, we believe that we are likely to encounter strong support at the $3.2k region. Although, the break of the monthly 55EMA leads us to believe that BTC may break the $3.2K level on its current drive down.

In this post Shawn Dexter explains why the Ethereum Constantinople Hard Fork was delayed. He states the reason for the delay and any actions you many need to take in response to the delay. Shawn also explains security vulnerability called a Reentrancy Attack and how it was also used in the DAO Attack of 2016.

Constantinople Hard Fork Delay

Unfortunately, the long-awaited Ethereum Constantinople Network Upgrade has been delayed. An auditing team discovered that the upgrade to Constantinople would introduce a security vulnerability. Before we go over the security vulnerability, let’s quickly answer a couple of questions I’ve been getting.

What do You Need To do?

This depends on whether you’re simply an investor/trader or if you’re a miner or node operator.

Do you need to do anything with your Ether?No – if you’re simply an investor, just sit tight. You do not have to do anything with your Trezor, Ledger, MyEthereumWallet (MEW). So, watch out for scammers who may try to confuse you.

2.Do I need to upgrade my node? Yes – if you’re a miner or node operator you will have to upgrade to a new version of Geth or Parity before approx. 4am Jan 17th GMT.

What was the Security Vulnerability in Constantinople?

Quick Answer: The security vulnerability arises from the update that introduces Cheaper Cost Of Storage [EIP1283] that we discussed in our Constantinople Simple Explanation post.

The cheaper gas costs allowed for an exploit in the Smart Contracts. This particular exploit is called a “Reentrancy Attack”.

What is being done about it?

It's already in the process of being fixed. The developers hoped that they could fix it before the network upgrade, but these things need time for proper analysis. They decided to err on the side of caution and postpone the hard fork until they fully investigate the extent of the vulnerability.

What is a Reentrancy Attack?

I’ll give you guys a simplified explanation. A Smart Contract may communicate with an external Smart Contract by “calling it”. If the external Smart Contract is malicious, it may be able to take advantage of this and take over control flow of the first Smart Contract’s code.

This allows the attacker to make unexpected changes to the first Smart Contract’s code. For example, it may repeatedly withdraw Ether from the Smart Contract by “re-entering” at a particular spot in the code. (Essentially, it makes multiple invocations of the withdrawBalance() function)

A Reentrancy Attack allows an attacker to take over control flow of the Smart Contract in concern.

Note:It’s important to note that this security vulnerability does not exist in the current Ethereum chain. All Smart Contracts on the current chain are Reentrancy-Safe!

The introduction of cheaper gas costs allows for the reentrancy attacks to be viable. Since Ethereum has not made any software upgrades yet, the main Ethereum chain is not at risk in any manner. In fact, even if the upgrade to Constantinople occured, only a small number of Smart Contracts would have been vulnerable.

So – Is this a bad thing?

Yes, and no. Yes – if you were making your investing/trading decisions solely based on this event. In a previous article we warned about how unpredictable price movement can be closer to events.

But overall this is a great thing for Ethereum – and for long term investors. Catching this security vulnerability right before the network upgrade is a gift. If Constantinople went live before and if the security vulnerability was discovered by malicious attackers, then things could got far worse!

Let’s not forget the disaster of the 2016 DAO Attack – which was actually caused by attackers exploiting code that was vulnerable to a Reentrancy Attack!

Lest We Forget: The DAO Attack of 2016

Many of you may not be aware of the DAO Attack of 2016. Attackers used a combination of two types of Reentrancy Attacks: Single Function & Cross Function.

The attackers were able to siphon 3.6 Million Ether from the DAO Smart Contract to their own accounts. Fortunately, the Ethereum community decided to Hard Fork and restored all the funds to the original Smart Contract. However, this led to a lot of controversy and led to the infamous Ethereum and Ethereum Classic network split.

Up to today, Ethereum bears the stain of the DAO controversy – albeit fading with time. It would be a disaster if it were to happen all over again.

Overall – This Is A Good Thing

The fact that this vulnerability was detected by a third party team – ChainSecurity – speaks to the network strength that Ethereum has built over the years. Ethereum has a global development strength that made itself a powerhouse. Multiple teams across the world are working on finding improvements, flaws & vulnerabilities. These are flaws that could sink other projects if gone undetected. The Ethereum community, on the other hand, is showing its strength.

Sure, prices may take a hit for the short-term. But like I said, it could have been far worse. In the long run, this delay will be forgotten. A security breach (and possible contentious hardfork that would follow) would never be forgotten.

Disclaimer: The ideas presented in this article should not be taken for investment advice, and are simply the views and opinions of the authors.

This is the second weekly collaboration between Eric Crown & Mango Research. Eric is, by far, one of the few technical traders in the space that really knows what he’s doing. He has over 10 years of experience trading traditional markets and market-making for equities. What we like about Eric the most is that he doesn’t simply trade technicals – he trades the crowd psychology & behaviour derived from the technicals. We’re excited about this collaboration and will hope you enjoy & learn as much as I have from Eric.

Quick Summary

Our overall bearish bias remains intact. The weekend displayed a glimmer of hope with Bitcoin rallying to nearly $3800. But the quick sell off that ensued only served to strengthen the bearish case. The sell off lined up perfectly with a retest & rejection of both: the daily 21 EMA & 3-Day M-formation neckline.

Furthermore, this also confluences with the breakdown of the larger symmetrical triangle on Bitcoin. All signs point toward a retest of the $3250 area. But will that be the bottom? We discuss our opinions on this matter and the rest in this report.

Weekend Roller Coaster – Key Rejection of 21 EMA

It’s been a roller coaster of a weekend. Bitcoin price witnessed a sudden $200 move in both directions within a matter of hours.

Saturday started strong with Bitcoin making a quick move from the $3600 to $3775 – almost a $200 move to the upside. Could we have foreseen this move? Perhaps.

Bitcoin formed a smaller Symmetrical Triangle over the week. Eric Crown has emphasised that symmetrical triangles have an equal opportunity to break to either side. However, in a overall bearish trend – we tend to lean toward the downside.

“ Symmetrical Triangles have an equal opportunity to play out to either sideEric Krown

Surprisingly, Saturday saw Bitcoin break the smaller Symmetrical Triangle to the upside. The breakout hit the measured move perfectly. Although Eric himself leaned to the downside, he demonstrated his professional skills by responding to market action and trading the breakout perfectly.

Rollercoaster action: Upward break of the triangle and promptly sold into..

The break to the upside had many people feeling bullish about the markets once again. But the anticipated follow up simply failed to arrive.

Instead, sellers stepped in promptly and sold heavily into the $3775 level. The price quickly retreated to $3700 which resulted in a successful rejection of the daily 21EMA break. And this was key! (we’ll discuss why in the next sections)

Rejection of the 21-Ema on the daily.

Sunday showed a powerful response to the rejection of the 21 EMA. With rejuvenated confidence sellers were able to push the price of Bitcoin all the way down to $3500. A $200 move to the downside this time.

Interestingly enough, the rejected 21 EMA lined up with $3700. The $3700 was also the neckline for the 3-Day M-For-Murder formation (double top) that we also discussed in the previous post.

Incoming Murder? M-Formation Retest

As Krown would say: “M” stands for Murder!”. If you’re forming an M-like formation, you don’t want to break that neckline. And Bitcoin did just that when it closed a three-day candle under $3695. This neckline break has a high degree of playing out to the downside – especially on the higher time frames.

However, these formations may occasionally show a false breakout to trap people. A re-test of the neckline isn’t uncommon. But a rejection of the retest adds further probability of it playing out.

Notice the weekend rejection of the 21-EMA lined up beautifully with this neckline (as displayed in the image below). This is very likely to increase seller confidence, as they begin to target the measured move for this break.

“ Rejection of the neckline retest on the 3 Day​

Double top (M-formation) break and retest of the neckline.

The measured move for this is typically the length between the neck and the top. This points to a move downward to around $3200 level area.

And this is where things get even more interesting. We’re already seeing confluence with the Daily 21 EMA rejection and the 3-Day M-Formation rejection. These also line up perfectly with Bitcoin’s Symmetrical Triangle formation and the 200 Simple Moving Average.

Confluence Galore.. Bitcoin's Symmetrical Triangle

BTC toiled away on a larger symmetrical triangle for around 2 weeks. We first discussed this in our previous post. The projected measured move on the triangle pointed us down to the $3200 level.

The triangle broke down on January 10th – with volume confirmation. What do we mean by volume confirmation? Simply that there was high enough volume on that break down, to justify our conviction in the break. Essentially, a lot of sellers stepped in for that move.

“ As long price lives below $3850, the symmetrical triangle is still in playEric Krown

Break of the symmatrical triangle – pointing to $3250 range

The 200 MA's

The 200 Moving Average is typically a strong level that draws in a lot of attention. It gets even stronger on the higher time-frames such as the weekly chart. Currently, BTC has been ranging between the weekly 200 Simple Moving Average and the 200 Exponential Moving average.

After breaking the 200 Exponential on its first pass, Bitcoin went on to test the 200 Simple Moving Average which proved as strong support. Bitcoin then went on to test the 200 Exponential a few times and was rejected each time. This leads us to believe that a test of the 200 Simple Moving average is imminent.

The 200 Simple Moving Average is currently sitting at the $3250 range which has perfect confluence with:

M-formation breakdown

Symmetrical Triangle breakdown

Both of the patterns above have a measured move to the $3250 range as well. The big question now, however, is:

“ Is $3250 the low of the market?

Many seem to believe that we have seen the lows. However, we strongly believe that the lows are not in just yet.

Volume....Where Art Thou?

Unlike most other cryptocurrencies, BTC has ample price cycle history to draw some clues from. One of the clues left behind is the Volume Signature during the 2014-2015 bear cycle.

Volume – while often misused – is one of the best ways to understand the overall crowd behaviour on a particular asset. Remember, we aren’t simply trading the indicators. Instead, we are trying to derive information about the mindset of the crowd.

“ Volume allows you to pinpoint the footprints left by the big market playersEric Krown

Let’s take a look at the low of the 2014-2015. BTC saw a devastating weekly price drop of 45%. This was accompanied with volume doubled that of the preceding weeks of price action. Below is the 2015 BTC weekly chart:

A closer look at the current volume profile indicates low participation. What does that mean? Essentially, we aren’t seeing the same anxious/exuberant selling & buying behaviour that we saw in 2014. Does that mean we are looking for the exact percentage drop & volume profile repeat once more? No, absolutely not.

Volume in the current conditions showing corrective behaviour.

However, the historic data does give us an idea of the behaviour we would like to see. If we see data that indicates a certain behaviour, then we may conclude that there are signs of a bottoming. As of now, however, we are not seeing any clues that point toward a bottom being in.

Do we believe that we will blow past the bottom right away? No – these things take time. In fact, Bitcoin is showing characteristics that are very reminiscent of it’s consolidation during the $6000 region. It may very well be that Bitcoin consolidates in a very similar way before finally break the $3k region.

That being said, there is one factor that may lead Bitcoin to it’s lows quicker than anticipated – Ethereum.

Ethereum H&S - Breaking It or Faking It?

As mentioned in the previous report, Ethereum does seem to be leading the market. The event-driven rally was followed up with the much expected dump in price. Typical event-driven-market-behaviour:

Event is announced weeks in advance.

Price begins to rally closer to event.

Sell-off begins just before the event.

And this is precisely how Ethereum’s price action has played out over the past month. It rallied closer to the event date, and then the price began to reverse. Additionally, Ethereum seems to be putting together a bearish reversal pattern that points to possible new lows as well.

Typical event-driven market behaviour: Ethereum rallies & dumps.

We typically do not like to point out a Head & Shoulders pattern prematurely – especially since it’s one of the patterns that is most often acted upon far too early. However, Ethereum has all the underpinnings of a Head & Shoulders (H&S) pattern. Eric Crown agrees with the likelihood of Ethereum forming a reversal H&S pattern as well, stating:

Correct shape

Correct Volume characteristics

Correct Price Action characteristics.

Well defined neckline.

“ However, and this is a big “however”... We do not have the break of the neckline yet.

And until the neckline is broken with Volume Confirmation, we cannot call this a fully formed H&S. For now, we can say that Ethereum has all the makings of a Head & Shoulders – but it’s missing the final element: The neckline break

Ethereum shaping a H&S formation – but wait for the neckline break.

So what happens if we do get the neckline break? Well, this is where things get interesting (or scary, depending on your disposition) The measured move for this neckline break points to a price of approximately $70.

While this may surprise people, it’ll be prudent to remember the following points:

Ethereum has already visited the $80 region

If Bitcoin were to make new lows, it’s not far fetched to point Ethereum to new lows as well.

But again, we must emphasize that this thesis is only valid if the H&S neckline breaks. Ethereum is currently sitting at a strong support level. And If the neckline doesn’t break relatively soon, then we could possibly consider the H&S thesis invalidated

Weekly Bitcoin Price Prediction: Summary

Overall trend still remains bearish, and multiple signs point to Bitcoin visiting the $3250 region. While we do believe that Bitcoin will eventually make new lows, we don’t believe that we are likely to break the $3k region just yet. However, Ethereum is putting together a bearish reversal pattern that points Ethereum to new lows. Since Ethereum has been likely leading the market recently, we wonder if it could be the impetus for Bitcoin visiting new lows as well. That being said, all of this is predicated on Ethereum breaking it’s neckline – which it hasn’t done just yet.

In this post Shawn discusses the recent Ethereum Update in regard to their roadmap for Casper & Sharding. Casper FFG with the 1500 ETH minimum stake will be removed from the Ethereum Roadmap and replaced with Casper v2 implementing a beacon chain. Shawn also provides us with estimates for the updated Ethereum Casper release dates

Ethereum Roadmap 2019: Updates, Changes & Release

If it’s been awhile since you last checked the Ethereum Roadmap – then oh boy, you’re in for some surprises. A lot has changed since the beginning of 2018 and even 2019!. We've seen sudden delays, timelines extended and priorities have shifted (rightfully so…).

The biggest one of date has been the postponing of Ethereum's Constantinople Update for 2019. However Ethereum has also unveiled a "new" roadmap called Ethereum 2.0.

The most recent Ethereum updates have a lot of people confused. I don’t blame them. Crucial updates are found buried in comment sections across various forums and news websites have been vague. It's hard to keep up.

Ethereum Roadmap: Updates & Delays!

The recent delays and roadmap changes have created some confusion. Several people are misunderstanding Ethereum 2.0 – and I don't really blame them.

In this post, we will clear out any confusion in regard Ethereum 2.0 roadmap update (Serenity), the Constantinople Delay, the expected ETH PoS date and any other updates on Ethereum's Serenity release.

Note: This post has been updated as of January 17th 2019 – and a lot may change from now. In the beginning of this article we discuss the roadmap update for Ethereum – which includes the big Serenity Release. We then discuss a keystone of the roadmap & Serenity – the Constantinople update and its delay in 2019.

Further down in this article we discuss Ethereum's casper release date estimations and why the release of POS has been pushed back.

Ethereum Roadmap: Ethereum 2.0, Constantinople & Serenity

Ethereum 2.0

Ethereum unveiled their new roadmap and dubbed it "Ethereum 2.0". But everyone seems to be misunderstanding the concept behind Ethereum 2.0. In fact, the core team has been receiving criticism for changing their minds too often. In truth, plans haven't changed much at all – they are simply more defined.

Ethereum 2.0 won't be a single big update release. Instead, it will be a series of updates that will lead to a more efficient, faster & scalable Ethereum.

Ethereum 2.0: Solving The Trilemma

The combination of these releases will synergise with each other in order to tackle the Blockchain Trilemma problem (read my analogy: The Village Trilemma) In essence, the Blockchain Trilemma forces a blockchain to pick two of the following:

Security

Decentralization

Scalability

However, Vitalik Buterin and the rest of the Ethereum team sought to find the right balance between the three. This was no easy problem to tackle. However, the release of Sharding, Proof Of Stake and eWasm achieves just that. Ethereum 2.0 will be a huge milestone in the Ethereum roadmap.

The Ethereum team has had three major roadmap milestones laid out for them since 2016:

Byzantium

Constantinople

Serenity

Each of these milestones laid the groundwork for eventually moving to Proof OF Stake (Serenity). Byzantium provided the much needed security. And Constantinople was going lay the pieces to allow the transition to Serenity (Casper V2). Constantinople was originally supposed to include a hybrid PoW/PoS model. However, the Ethereum developers decided to scratch that idea and move forward with another plan. This led to a delay in roadmap – and Serenity (proof of stake) would have to be pushed back.

I explain the reasons for the change in plan and the delay of PoS later in this post.

Ethereum's Roadmap: Byzantium, Constantinople & Serenity

Constantinople plays an important role in Ethereum's transition to Ethereum 2.0. The update is going to include major improvements such as the block reward reduction, reduced transaction costs and compatibility for State Channels.

Constantinople was key in the Ethereum Roadmap

The hard fork was initially scheduled for for January 16th 2019 but was delayed at the last minute due to a discovery of a security vulnerability.

Ethereum's Roadmap & Release Schedule 2019 - 2021

The Ethereum Roadmap will always be evolving. However, the major goals of achieving the right balance of scalability, security & decentralization have never changed – and will be unlikely to change in the future. Ethereum 2.0 is simply a new label to define those goals in a clear & concise manner.

Ethereum Casper V2 – Still Part Of The Ethereum 2.0 Roadmap!

At this point, some of you may be asking:

"Wait – what happened to Ethereum's Casper?"

As can be seen from the image above, Ethereum 2.0 includes Proof Of Stake and Sharding as its major updates. Both of these updates are the two major components of Ethereum Casper V2. So in truth, Casper V2 is included in the Ethereum 2.0 roadmap.

The image below shows the estimated release schedule and roadmap based on the new Ethereum Casper Updates.

Updated Ethereum Casper Release Dates (2019 Estimates]

As you can see, the expected dates for Ethereum PoS (test & release) is somewhere in mid 2019. The exact date for Ethereum's Casper Proof Of Stake is uncertain. If you are an ETH investor or interested in investing, I suggest you read up on the events leading up to these delays. In the next section I explain transition from the Initial Ethereum Roadmap and the Updated Ethereum Roadmap with Casper Version 2.

Ethereum PoS Date & ETH Roadmap - The Quick Read on ETH PoS

​​​​​​​​​​I know some of you are busy and want a quick overview on the Ethereum Roadmap and pos date. So I wrote this section in that vein. This section will likely evolve with the updates on the Ethereum Casper release dates.

​​​​​​​​​​ETH holders are probably excited for the Ethereum PoS release date. The Proof of Stake update will allow them to stake their ETH and become validators on the Ethereum Network. However, the Ethereum roadmap changed since the beginning of 2018 which has caused a few delays. This pushes the new Ethereum PoS date back to mid 2019. But it's not all bad news. In fact, for most ETH holders the new ETH PoS date may be a blessing in disguise.

Ethereum PoS Date & Delay - Not All Bad News

Casper FFG has been discarded and we will be moving directly to Casper V2. This will allow ETH investors to become a validator with as little as 32 ETH. This is a huge win for a majority of ETH holders and will also keep the network decentralised. Initially, Casper FFG would require a deposit of 1000 ETH into the Ethereum Proof Of Stake chain. And the plan was to reduce the 1000 ETH requirement when Sharding would finally be released. During this time, only large ETH investors would be able to take part in the PoS process – which leads to centralisation and lack of inclusivity.

However, they have now decided to skip a step, and build Casper on the same chain that will be used for Sharding. This called the "Beacon Chain" which will serve as the ETH PoS chain and also serve as the base layer for Sharding. I explain this in more detail over here: Casper V2: Sharding & Beacon Chain Explained Simply. This is the fundamental reason why the 32 ETH deposit will be feasible.

Ethereum: The Initial Roadmap

First, let’s quickly go over what the road map was supposed to be last year. Again, I’m going to keep this simple.

As of last year, the roadmap included two major milestones:Metropolis &Serenity

Both of these milestones were efforts to move towards eventual scalability with Proof Of Stake & Sharding.

Ethereum Roadmap Before Update

Metropoliswas divided into two phases:

Phase 1: ByzantineThe Byzantium update would bring privacy improvements. It took place on the Ethereum chain last year.

Phase 2: ConstantinoplePoW/PoS Hybrid (Casper FFG) and more. Constantinople was supposed to happen earlier this year. But all priorities were shifted to rolling out Proof Of Stake & Sharding as soon as possible.

Up until June 2018, Constantinople’s Casper FFG was still in play. However, that plan is now being dropped as well – for something more clean and efficient. This brings us to the new release-date milestone on the Ethereum Roadmap for 2018: Casper V2

Casper 2.0: The Initial Plan

The initial plan was to transition to Proof Of Stake with Casper FFG. Casper 2.0 was to be a Smart Contract that allowed you to become a validator with a deposit of 1500 ETH. The Ethereum estimated this release date to be somewhere in 2018.

Proof Of Stake was to be implemented first and the team would roll out Sharding after. There were separate deposit pools for Sharding and Casper.

This is not true at all. And it’s important that expectations are set right.

Casper 2.1: The Real Roadmap

The plan for Casper FFG requiring 1500 ETH deposits will be scrapped. Casper V2 will be implementing a “beacon chain” – onto which Casper and Sharding will be merged (here is where people get confused).

This does not mean that Casper and Sharding will be launched on the beacon chain together. It simply means that Casper and Sharding will be implemented on the same chain. So, Casper could come first, and Sharding be implemented much later. Or vice-versa.

Casper FFG vs Casper V2 Ethereum Update

So to summarise:

A Beacon Chain that will be used for both: Casper & PoS validators

Sharding and Casper will be worked on concurrently – they are independent efforts

Only 32Ether minimum staking deposits

The beacon chain was originally supposed to be used only for the Sharding implementation.

An Analogy For The Casper V2 Update

The Casper V2 Ethereum Update has been confusing a lot of people. I don’t blame you guys – the information has been all over the place. But maybe this analogy will help:

Think of the Casper and Sharding as two cars going to a family picnic. To get there, both cars have to merge onto Highway 10. We’re not sure which car will merge on first. We simply know that:

Both cars are headed there (Casper and Sharding are the two cars)

Both need the Highway to get there efficiently (Beacon chain)

Everyone needs to eventually get to the family picnic (scalability)

Similarly, Casper and Sharding are two independent projects – either could be completed first.This unified approach will allow for a minimum staking requirement of 32 ETH deposits.

Casper will most likely be launched first, but we can’t rule out the possibility of Sharding going faster.

Ethereum 2.0 & Casper Release Date: Conclusion & Summary

Ethereum's release date for Casper FFG was scheduled for 2018. However, the new version of Casper will have a release date somewhere in 2019-2021. Yes, the rather timeline for release is vague, but there's good reason for that. Let's recap quickly:

PoS Release Date Delay: FFG was Scrapped

As mentioned, the initial plan was to roll out Casper FFG as a hybrid PoS/PoW. Casper FFG would have Proof of Stake (PoS) but would not have Sharding. With the PoS release, Validators would be allowed to deposit ETH in order to stake. However, they would require to 1500 ETH in order to participate in the PoS consensus. This wasn't ideal because it would entail a lot of centralisation.

Updated Ethereum Casper Release Dates (2018 Estimates]

In 2018, the need for scaling became increasingly urgent. The Ethereum team shifted all focus to the key releases that would move the needle toward scalability; namely, the PoS release and Sharding release. Casper FFG was to be the first PoS release, but would still use the PoW chain. This release date was estimated to be somewhere in 2018. The team was to release Sharding after PoS.

Ethereum Shifted Focus to Releasing Casper & Sharding ASAP

Casper FFG allow Ethereum to release a PoS quicker. However, it would entail "double work". Since Ethereum would have to eventually release/migrate to a pure PoS chain. Because of this, they decided to scrap working on Casper FFG. They will now be working toward releasing Casper V2 – which will have PoS on the beacon chain as well. Since Sharding will be implemented on the beacon chain as well, it allows Ethereum to have a unified approach for their releases.

Unfortunately, this pushes back the release date for Ethereum Casper V2 to around 2019-2020. Sharding will be released on the same beacon chain that will be used by the PoS release. This does not imply that Casper and PoS are coming together. I would estimate it's release date to be in 2021. But there's a possibility that it may beat the PoS to the release finish-line.

Disclaimer: This ideas presented in this article should not be taken for investment advice, and are simply the views and opinions of the author

This report will be the first of the weekly collaborations between Eric Crown & MangoResearch. Eric is, by far, one of the few technical traders in the space that really knows what he’s doing. He has over 10 years of experience trading traditional markets and market-making for equities. What we like about Eric the most is that he doesn’t simply trade technicals – he trades the crowd psychology & behaviour derived from the technicals. We’re excited about this collaboration and will hope you enjoy & learn as much as I have from Eric.

Ethereum Leading The Way

Over the past month Ethereum saw a massive rally of nearly a 100% gain. But as we drew closer to the Constantinople upgrade, Ethereum price momentum began to show signs of exhaustion. This is typical event-psychology-behaviour:

Event is announced weeks in advance.

Price begins to rally closer to event.

Sell-off begins just before the event.

We discussed this move & its similarities to the BCH in a previous post. We mentioned how Ethereum’s event-driven rally may have propped up the market, and how it may similarly lead the market back down after a full retrace.

After breaking down from the top, Ethereum began to form a perfect descending triangle. We discussed this as it was playing out in Krown’s Discord Channel. A bearish formation in a macro-bearish trend is very likely to play out to the downside. And it looks like it did.

Now, the question is – will it do a partial retrace or a full retrace? Ethereum is currently sitting at a key Fibonacci level 116. This level is more likely to be supported for now. But a bounce from here may lead to an ugly H&S formation.

Bitcoins Reaction: Pointing to a Retrace to $3200

Bitcoin rallied to a local-high of around $4100 level. it was here when far too many people began to call an “inverted Head & shoulders” pattern. Krown, however, vehemently disagree citing the following reasons:

Volume characteristics were wrong

Descending neck line

Overall shape wrong

Krown cautioned against playing this move early, and warned that it could be a trap.

The Golden Cross Feint

As the price flirted with the $4100 region, the 50 EMA and the 200 EMA began to draw close on the 4hr charts. When the 50 EMA crosses over the 200 EMA, it is considered very bullish and is referred to as the Golden Cross.

A Golden Cross is usually followed with upward/ bullish price action. The move playing out would have had perfect synergy with the “inverse head & shoulders”.

However, as price action unfolded on the cusp of the golden cross, BTC witnessed heavy sell pressure. This quick turn to the downside prevented the golden cross from playing out, and instead resulted in a 50 - 200EMA “Kiss”. A clear depiction of the “Kiss” is presented in the image below

Krown had something pretty profound to say about this:“The massive dump told you something by NOT telling you something”

When you have heavy selling coming in to avert a bullish move, you know that the big players/bots are still on the sell-side of the market. This further confirmed that the Inverse H&S was more of a trap than an actual formation. With the rejection of the Golden Cross, Bitcoin seemed to follow Ethereum’s lead and swiftly retreated to $3600.

BTC Now Pointing To $3250

The heavy sell-off on BTC led to a clean break of the larger Symmetrical Triangle. Symmetrical Triangles usually could break either way Why? Because it indicates that while sellers are stepping in at lower and lower prices – buyers are also stepping in at higher and higher prices.

However, since the overall trend is still bearish, we lean toward the downside – but always wait for confirmation of the break! The move to $3600 broke downward on the symmetrical triangle with high volume. This was a clear confirmation.

As can be seen above, the Symmetrical Triangle broke to the downside. The measured move for this symmetrical triangle points toward $3250 – which is really interesting. Why? Because there are a couple of key indicators that are currently showing strong confluence with the $3250.

Lets go over them:

3 Day: “M Stands For Murder!”

Patterns and Moving Averages on higher time frames have a much higher likelihood of playing out and being respected. The three-day chart is indicating a double top or “M” formation. And as Krown likes to say: “M” stands for Murder! Bitcoin breaking through the $3600 region also coincides with the break of the neckline of the M-formation.

The target for this is typically the length between the neck and the top. Interestingly, this points to a move downward to around $3250 – which has confluence with the measured move of the symmetrical triangle.

Weekly 200 Simple Moving Average

The 200 Simple Moving Average (SMA) on the weekly time frame has proved itself as strong resistance. The 200 SMA plays a key role in most time frames, but even more so on higher time frames like the weekly.

On Bitcoin’s last drive down, the 200 SMA stopped it in its tracks at around $3150. The 200 MA is now sitting at the $3260 region. Will we be seeing a retest of this moving average? Overall trend does seem down.

It’s interesting to note that Bitcoin has never closed a weekly candle below the 200 Simple Moving Average. (This doesn’t mean that it won’t happen in the future. It simply means that it’s a key level to watch for a potential bounce. Remember, there’s a first time for everything.)

Pay Heed To Resistance

While we've presented a case of a measured move playing into the $3200s level, it must be noted that price action towards $3200 level may take time to play out, and is likely to encounter resistance on the way.

As things stand, BTC price hovers around the 0.618 Fibonacci level at $3520, followed by 0.786 Fibonacci level at $3350. Hence, while the trend remains bearish, it'd be prudent to prepare for resistance on the way.

Quick Update: As price action unfolded last night, it turns out BTC met with resistance at the 0.618 Fibb level. Lets wait and watch for what happens next.

Overall Picture - Still Bearish

The trend is your friend until the end of the trend – and currently, the trend is down!

So how do we know when the trend is changing? Well, before we change our stance, we will be looking at a few key indicators to flag green:

Make Higher High's on the daily chart ​So far Bitcoin has consistently been making lower highs on it’s daily chart. This is a strong indication that the trend is still down. This will be the first sign.​

2. Open and Close a weekly candle above 200 EMA

Ever since we closed a week under the 200 Exponential Moving Average, we have not been able to break above it. We’ve tested it, but always closed the candle underneath it. Until we close a candle above the 200 EMA, we will stay bearish on the market.

A break above that level will have us reconsidering and looking small opportunities to the upside.

The Ichimoku Cloud is one of the easiest ways to get a birds eye view of the current trend. If the cloud is red, the trend is down. If the cloud is green, the trend is up. If the price is under the cloud, trend is down – and vice versa.

Currently, the top of the cloud is sitting at around $5000 to $5200 range. A break above that range will show a strong indication of trend reversal.

4. A break above the $6000 level!Finally, a breaking above the $6000 level will confirm that the trend is no longer downward. We will be overall bullish on the market and will look for opportunities accordingly.

Have We Seen Our Lows?

While many people may disagree, we strongly believe that Bitcoin has not seen it’s low yet. There are multiple signals that usually indicate that a floor price has been made:

High Volume Buying

Volatility Index

NVT Signal

None of these signals are flashing on – which makes us lean to newer lows. We will discuss these in greater detail in the next report. But at the moment for Bitcoin our eyes are on some key levels of support:

$2450 zone

$1900 zone

When will this happen? Well, time-analysis can be tricky. These things can take time to play out. It could take weeks, or months… or it may never happen. Remember, we need to first break the $3250 zone which is being supported by the weekly 200 SMA.

Bitcoin Price Prediction: Summary

Predicting price is impossible. We can only discuss what is more "probable". All it takes is one player to change everything. However, as things stand, Bitcoin looks like it wants to eventually ​trace back to the $3250 level. But since Ethereum is leading the way at the moment, we are expecting the Ethereum bounce to prop up Bitcoin as well.​​

Ethereum Price Prediction: Summary

As for Ethereum, the event-driven nature of the price action makes it rather unpredictable. It is currently sitting at a key support level of $116. And we expect a bounce here. But we also wouldn’t be surprised if it gave up all of it’s gains over the past month and revisits the $90 region.

Ethereum's Difficulty Bomb is often misunderstood. Most explanations are convoluted and technical. This post is a simple & quick explanation of what is the Ethereum Difficulty Bomb. Shawn also explains it's relation to the block reward reduction in Ethereum and the Constantinople update!

What Is The Ethereum Difficulty Bomb?

With Ethereum's Constantinople update coming up on January 16th 2019, there have been an increasing number of questions regarding Ethereum's "Difficulty Bomb". Most other explanations out there are either far too complex are simply wrong. In this post I will give you guys a simple and clear explanation of what Ethereum's Difficulty Bomb really is and why it was put in place.

Ethereum Difficulty Bomb: The Simple Explanation

The Ethereum Difficulty Bomb simply refers to a tool within Ethereum. This tool allows the core Ethereum developers to adjust how difficulty it is for a miner to win a reward. ​Miners win rewards each time they create a new block and add it to the blockchain.

When the Ethereum Difficulty Bomb is set to "detonate", it will get exponentially difficult for miners to win rewards via mining. But why would the developers want this? Because eventually they will want miners to stop mining and start validating. Remember, Ethereum is set to transition from Proof of Work to Proof of Stake. There is no mining in Proof Of Stake. We will have validators instead.

Ethereum Difficulty Bomb: A Dis-Incentive For Miners

Even though Ethereum may switch to the Proof of Stake chain, the miners may continue mining on the Proof Of Work chain if not properly incentivised. In order to avoid security issues (like a fork), the developers wanted to give the miners a little "nudge" to switch to Proof Of Stake. The Ethereum's Difficulty Bomb would reduce their rewards on the Proof Of Work chain, and thus incentivise them to switch to the Proof Of Stake Chain.

Why Was The Ethereum Difficulty Bomb Delayed

​Unfortunately, there was a delay in the upgrade to Proof Of Stake. And the entire point of the Difficulty Bomb was to incentivise miners to switch to Proof of Stake. So the Ethereum team decided to delay the difficulty bomb until Casper was ready.

Ethereum Difficulty Bomb Reduces Block Reward

Ethereum Inflation Rate & Difficulty Bomb

The delay, however, did not sit well with long term investors. Long term investors were looking forward to the difficulty bomb (and Proof of Stake). Why? Because lower Block Rewards would mean a lower Inflation Rate. This was going to be a very bullish update for long-term investors. Since people Difficulty Bomb was delayed, the Ethereum team decided to add a Block Reward Reduction to theEthereum's Constantinople network upgrade!